Rate of US new home sales falls

The housing slowdown has hit the wider economy

New home sales in the US in August fell to their lowest pace in 17 years, a sign of continuing weakness in the housing sector.

The annual sales pace fell to 460,000 homes, according to Commerce Department figures, down 11.5% from July's figure and a larger drop than forecast.

The average price of new homes sold fell 11.8% to $263,900 (£142,982).

Separate data showed US durable goods orders suffered their largest drop in August for seven months.

A slump in orders for planes and cars was a key reason for the fall.

Housing sector

The latest housing sales figures show that the sector is still being hard hit, with analysts saying it will be some time before it recovers.

Industry is in trouble Ian Shepherdson, High Frequency Economics

The figures come a day after Federal Reserve chief Ben Bernanke warned Congress that the economy was broadly weakening.

President George W Bush is urging Congress to pass a $700bn bail-out plan that would help banks offload their bad debt, in a bid to boost the market and improve the outlook for the financial sector.

Figures released earlier on Thursday by the Commerce Department showed new orders for long-lasting manufactured goods had fallen 4.5% in August after three months of small rises.

"This is a very weak report. Industry is in trouble," said Ian Shepherdson, chief US economist at High Frequency Economics.

In the past strong demand for exports has offset weak demand within the domestic US market.

However, a slowdown has begun to affect the global economy which has dampened US overseas sales, particularly in Japan and Europe.

Much of the fall in durable goods orders was due to the transport sector. Orders excluding transport only fell 3%.

The dip was led by a 38.1% fall in the volatile commercial aircraft sector, its biggest fall in a year.

Meanwhile, orders at carmakers registered an 8.1% fall, the biggest in 19 months, with a combination of rising fuel prices and growing job insecurity making US consumers increasingly reluctant to make big purchases.